(All currency figures are in Canadian dollars unless otherwise noted)
High River Gold Mines Ltd. (TSX:HRG)("High River" or the "Company") today
reported its financial results and operational highlights for the year ended
December 31, 2011. The Consolidated Financial Statements and related Notes along
with the Management's Discussion and Analysis have been filed under the
Company's profile at www.sedar.com and can be viewed on the Company's website at
www.hrg.ca.
HIGHLIGHTS FOR 2011
Financial Results
-- Net gold revenue of $563.8 million, an increase of 29% from 2010.
-- Net income attributable to equity holders of $170.4 million ($0.20 per
share) compared to a net income of $111.7 million ($0.13 per share) in
2010.
-- Cash flow from operations of $188.9 million, up from $154.3 million in
2010.
-- Cash and cash equivalents increased to $162.3 million, up from $ 154.0
million in 2010.
-- Working capital increased to $276.7 million, up from $210.9 million in
2010.
-- Current and long term debt decreased to $20.5 million, down from $25.0
million in 2010.
-- In January 2011, Royal Gold, Inc. ("RGI") agreed that the Completion
Test (as such term is defined in the amended and restated funding
agreement (the "Taparko Funding Agreement") dated February 22, 2006
between RGI and Somita S.A. ("Somita")) had been satisfied and agreed to
release its security interests in certain collateral (including certain
equity investments in public companies) that it held pursuant to the
Taparko Funding Agreement.
-- In June 2011, High River has agreed to settlement terms with its former
contractor in respect of a previously disclosed action brought against
Somita. As previously disclosed, a claim regarding services that were
delivered to Somita was filed against Somita before the arbitrator in
South Africa in 2009. The aggregate amount of the claim was US$3.7
million and High River filed a statement of defense and counterclaim for
damages. The settlement agreement provides for full and final settlement
of the contractor's claim against Somita for a settlement amount of
US$1,350,000.
Operations
-- Total gold production increased 11% to 367,690 (2010 - 329,971 ounces
(100%)). Total cash cost per ounce decreased 0.5% to US$650 (2010 -
US$653 per ounce) (see the Non-IFRS Financial Measures table).
-- The Zun-Holba and Irokinda Gold Mines produced 131,877 ounces (2010 -
135,636) (100%) at a total cash cost of US$673 per ounce.
-- The Taparko-Bouroum Gold Mine produced 131,519 ounces (2010 - 127,684)
(100%) at a total cash cost of US$584 per ounce.
-- Gold production at Berezitovy was 104,294 ounces (2010 - 66,651 ounces)
(100%) at a total cash cost of US$ 702 per ounce.
-- High River's subsidiary in Burkina Faso, Bissa Gold S.A. ("Bissa Gold"),
was granted the mining license for the Bissa Gold Project by the
governmental authorities of Burkina Faso for a term of 20 years with a
possibility of renewal. Bissa Gold has engaged an EPCM (Engineering,
Procurement, and Construction Management) contractor and mining and
processing suppliers.
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Cash Operating
Production (100%) Costs Total Cash Costs
Oz US$/Oz US$/Oz
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Buryatzoloto 131,877 571 673
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Berezitovy 104,294 601 702
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Somita 131,519 537 584
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Total/Weighted
Average 367,690 650 671
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2011 total operating and non-operating cash costs reached US$671 per ounce.
Non-operating cash costs per ounce mainly represent corporate administration,
exploration, and other expenses such as realized foreign exchange losses.
-- Zun-Holba and Irokinda Underground Gold Mines:
-- Continue to operate close to its full capacity.
-- Berezitovy Open-pit Gold Mine:
-- Production levels continue to be constrained by technical problems.
-- Higher gold grade and recovery rate as compared to 2010 made it
possible to reduce the decline in gold production against the plan
to 12%.
-- Taparko-Bouroum Open-pit Gold Mine:
-- Production increased compared to 2010, mainly due to the higher
amount of processed ore partially offset by lower gold recovery rate
and grade.
-- Unit cash cost increase was caused by several factors, among them
lower gold recovery rate, lower ore grade, local currency inflation
and its strengthening against the US dollar.
Corporate
-- On January 24, 2011, the Company's shareholders approved the change of
the Company's governing jurisdiction from the Canadian federal
jurisdiction under the Canada Business Corporations Act to the Yukon
Territory under the Business Corporations Act (Yukon). The Company
received its Letter of Satisfaction dated January 25, 2011. Industry
Canada issued the Certificate of Discontinuance effective February 2,
2011. The effect of these filings was to transfer the governing
jurisdiction of the Company from the Canadian federal jurisdiction to
the Yukon Territory. In connection with the continuance, the
shareholders also approved a new general by-law. The Articles of
Continuance and the new by-law are available on www.sedar.com.
-- The Arbitration Court of the City of Moscow (the "Moscow Court")
terminated the official bankruptcy proceedings for Prognoz Silver LLC
("Prognoz Silver") in connection with the application of Prognoz Silver
claiming that the criteria of bankruptcy are no longer in place.
-- In October 2011, the share capital of Berezitovy was increased which
resulted in the increase of the Group's interest in Berezitovy up to
99.91%.
-- In addition, Argentum CJSC ("Argentum"), a joint venture partner in the
Prognoz Silver Project, applied to the Moscow Court to commencing
official bankruptcy proceedings for Prognoz Silver.
-- Konstantin Sobolevskiy resigned as Chief Executive Officer effective
March 5, 2012.
DISCUSSION OF FINANCIAL RESULTS
Selected Financial Results
(in thousands of Canadian dollars except per share amounts)
---------------------------------------------
2011 2010 2009
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Gold revenue $563,789 $ 435,615 $ 363,259
Net income (loss) 170,364 114,852 (9,764)
Net income (loss) per share
(basic) 0.20 0.14 (0.02)
Cash provided by (used in)
operating activities 189,867 154,344 125,496
Total Assets 840,218,962 812,332 706,962
Loans and interest payable $563,789 25,025 84,031
Weighted average number of
shares outstanding (basic) 170,364 816,437,980 634,009,385
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The Company's consolidated net gold revenue for 2011 increased to $563.8 million
from $435.6 million in 2010. An increase in the gold price was the main growth
factor. The average realized price was US$1,543 per ounce compared to US$1,238
per ounce in 2010.
The Company reported a net income of $170.4 million ($0.20 per share) in 2011
compared to a net income of $111.6 million ($0.13 per share) during 2010.
Cash flow from operations of $188.9 million, up from $ 154.3 million in 2010.
OVERVIEW OF OPERATIONS
Underground Mines
The Company's attributable gold production from Buryatzoloto was 112,016 ounces
in 2011, compared to 115,209 ounces in 2010. Buryatzoloto continues to be
profitable and in general achieved its production objectives for 2011, with
131,877 ounces (100%) of gold produced at an estimated total cash cost of US$673
per ounce as compared to 135,636 ounces of gold produced at a total cash cost of
US$628 per ounce in 2010. (See the section Non-IFRS Financial Measures regarding
total cash costs.)
Unit cash cost increase in 2011 was caused mainly by macroeconomic factors such
as local currency inflation and its strengthening against the US dollar.
Inflation rate is on average around 10% per annum in Russia but could be higher
for some inputs used in mining industry. In particular salary inflation was the
case for Buryatzoloto in 2011 as well. Russian currency strengthened against the
US Dollar during 2011 making US dollar denominated unit cash cost higher.
Buryatzoloto continues to operate close to its full capacity. The Company's goal
is to maintain historic production levels. The amount of mineable reserves is a
concern for the management. An exploration program to extend the life of the
mines is underway at Zun-Holba and Irokinda mines and the Company expects the
new reserve and resource estimates for Buryatzoloto mines in 2012.
Open Pit Mines
Berezitovy Mine (Russia)
Berezitovy continued to experience technical problems during 2011. However,
higher gold grade and recovery rate as compared to 2010 made it possible to
reduce the decline in gold production against the plan to 12%. Berezitovy, like
Buryatzoloto, was affected by stronger local currency and inflation. However,
unit cash cost growth at Berezitovy compared to 2010 was limited by higher gold
grade (which required fewer tons to be processed) and a significant production
increase (due to the effect of fixed costs which do not depend on production
variance and therefore scale back cost per unit of production).
Taparko-Bouroum Mine (Burkina Faso)
Somita was 17% behind production plan in 2011 due to lower ore processing caused
by lower availability of loading equipment in mining and lower gold recovery
rate caused by the increase of the processing rate up to 200 tons per hour
partially balanced by higher ore grade. At the same time, gold production
increased as compared to 2010 due to the higher amount of processed ore
partially offset by lower gold recovery rate and grade. Unit cash cost increase
at Somita in 2011 was caused by several factors, among them lower gold recovery
rate, lower ore grade, local currency inflation and its strengthening against
the US dollar. Lower gold recovery rate and lower ore grade mean that to produce
the same amount of gold higher volume of mining and processing is needed, which
therefore pushes up the unit cost.
Exploration Projects
In 2010, the Company applied for a mining license in relation to the Bissa
project and the license was granted in June 2011. At the same time, High River
continues exploration at the Bissa group permits. In Q1 2011, a new technical
report compliant with National Instrument 43-101 -Standards of Disclosure for
Mineral Properties ("NI 43-101") was released, which included mineral resource
estimates for the Bissa project and some exploration properties in Burkina Faso
(Yeou, Ankouma, Bouly, Gougre, Zinigma).
AMENDED STATEMENT OF EXECUTIVE COMPENSATION
The Company has re-filed on SEDAR an amended and restated Form 51-102F6
Statement of Executive Compensation for the year ended December 31, 2010 (the
"Executive Compensation Statement"). The original Executive Compensation
Statement was filed on March 31, 2011. The revised Executive Compensation
Statement now provides disclosure that complies with Item 1.3(4) of Form
51-102F6 regarding external management companies and includes compensation of
the Company's officers that is paid by the Company's controlling shareholder to
such officers and is attributable to services provided to the Company by such
officers.
CLARIFICATION OF BOULY RESOURCE DISCLOSURE BY NORD GOLD
The Company wishes to clarify the statements made by Nikolai Zelenski, the Chief
Executive Officer of Nord Gold N.V., the Company's controlling shareholder, at
the European Gold Forum in Zurich, Switzerland in April 2011. During his
presentation, Mr. Zelenski referred to estimated mineral resources at the
Company's Bouly property that were higher than the mineral resources disclosed
in the Company's public record. Although the Company believes that its public
record in respect of its Bouly property complies with the standards prescribed
by NI 43-101, it felt a clarification was appropriate following discussions with
certain shareholders and the Ontario Securities Commission. Mr. Zelenski's
statement was informed by the Russian reporting standards rather than NI 43-101,
which standards include conceptual "prognostic resources" that are similar to
"exploration targets" as defined in NI 43-101. The mineral resources that Mr.
Zelenski was referring to were equivalent to "exploration targets" and therefore
should be considered by investors as "exploration targets" rather than mineral
resources, since the potential quality and grade of such exploration targets is
conceptual in nature. In addition, the Company expects to prepare an updated
mineral resources estimate for its Bouly property in Q2 2012, which shall be
released shortly thereafter.
About High River
High River is an unhedged gold company with interests in producing mines,
development and advanced exploration projects in Russia and Burkina Faso. Two
underground mines, Zun-Holba and Irokinda, are situated in the Lake Baikal
region of Russia. Two open pit gold mines, Berezitovy in Russia and
Taparko-Bouroum in Burkina Faso, are also in production. Finally, High River has
a 90% interest in a development project, the Bissa gold project in Burkina Faso,
and a 50% interest in an advanced exploration project with NI 43-101 compliant
resource estimates, the Prognoz silver project in Russia.
FORWARD LOOKING INFORMATION
This release contains forward-looking statements. Wherever possible, words such
as "intends", "expects", "scheduled", "estimates", "anticipates", "believes",
and similar expressions or statements that certain actions, events or results
"may", "could", "would", "might" or "will" be taken, occur or be achieved, have
been used to identify these forward-looking statements. Although the
forward-looking statements contained in this release reflect management's
current beliefs based upon information currently available to management and
based upon what management believes to be reasonable assumptions, High River
cannot be certain that actual results will be consistent with these
forward-looking statements. A number of factors could cause events and
achievements to differ materially from the results expressed or implied in the
forward-looking statements. These factors should be considered carefully and
prospective investors should not place undue reliance on the forward-looking
statements. Forward-looking statements necessarily involve significant known and
unknown risks, assumptions and uncertainties that may cause High River's actual
results, events, prospects and opportunities to differ materially from those
expressed or implied by such forward-looking statements. Although High River has
attempted to identify important risks and factors that could cause actual
actions, events or results to differ materially from those described in
forward-looking statements, there may be other factors and risks that cause
actions, events or results not to be anticipated, estimated or intended,
including those risk factors discussed in the Company's 2011 Annual Information
Form. There can be no assurance that the forward-looking statements will prove
to be accurate, as actual results and future events could differ materially from
those anticipated in such statements. Accordingly, prospective investors should
not place undue reliance on forward-looking statements. Any forward-looking
statements are made as of the date of this release, and High River assumes no
obligation to update or revise them to reflect new events or circumstances,
unless otherwise required by law.
High River Gold Mines Ltd.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(In thousands of Canadian Dollars)
As at As at As at
December, December 31, January, 1
Notes 31 2011 2010 2010
------------------------------------------
ASSETS (Note 23) (Note 23)
Current
Assets
Cash & cash
equivalents 3 162,310 153,964 82,061
Inventories 4 121,690 97,663 81,090
Loans to related
parties 5 24,361 7,951 -
Other assets 6 37,690 29,015 30,909
------------------------------------------
346,050 288,593 194,061
Non-Current
Assets
Exploration and
evaluation assets 7 80,035 114,610 102,852
Mine properties 8 107,105 53,296 76,166
Property, plant &
equipment 9 244,131 188,788 210,566
Available for sale
financial assets 86,023 109,633 64,810
Loans to related
parties 5 57,219 - -
Other assets 6 9,654 1,320 845
Deferred tax assets 10 77,610 56,223 42,720
------------------------------------------
661,777 523,871 497,959
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TOTAL ASSETS 1,007,827 812,463 692,020
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LIABILITIES
Current
Liabilities
Accounts payable and
accrued liabilities 11 51,566 34,576 33,753
Loans and other
borrowings 12 20,531 23,794 69,454
Derivative Financial
Liabilities 12 - - 13,685
Income tax payable 16,705 19,787 5,695
------------------------------------------
88,802 78,157 122,587
Non-Current
Liabilities
Loans and other
borrowings 12 - 1,232 14,398
Provisions 13 19,147 17,437 15,126
Deferred tax
liabilities 10 93,957 70,782 48,917
------------------------------------------
113,104 89,451 78,441
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TOTAL LIABILITIES 201,906 167,608 201,029
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EQUITY
Share Capital 16 641,298 641,298 611,815
Warrants 16 - - 13,265
Contributed surplus 25,079 24,621 15,991
Debenture conversion
option - 538 538
Available for sale
reserve 70,930 90,284 50,967
Foreign currency
translation reserve (45,071) (34,367) -
Retained
Earnings/(Deficit) 58,515 (109,917) (221,576)
------------------------------------------
Equity attributable to
equity holders of the
Company 750,751 612,458 471,000
Non-controlling
interest 16 55,169 32,398 19,991
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TOTAL EQUITY 805,920 644,856 490,991
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TOTAL LIABILITIES AND EQUITY 1,007,827 812,463 692,020
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High River Gold Mines Ltd.
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME (LOSS)
For the year ended 31 December
(In thousands of Canadian Dollars)
Note 2011 2010
------------------------------------
(Note 23)
Revenue
Gold 563,788 435,615
Silver 10,161 5,154
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573,950 440,770
Cost of sales (325,365) (264,232)
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Gross Profit 248,585 176,538
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Exploration expenses - (15,518)
General and administrative expenses (7,389) (4,475.00)
Other expenses (11,495) (12,914)
Interest income 8,609 2,004
Finance costs (6,636) (10,630)
Change in fair value of derivative - 13,685
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Profit before income taxes 231,673 148,690
Income tax expense 10 (40,470) (24,625)
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Profit for the year 191,203 124,065
--------------------------------------------------------------------------
Attributable to:
Non-controlling interest 20,839 12,407
Equity holders of the Company 170,364 111,658
--------------------------------------------------------------------------
Profit for the year 191,203 124,065
--------------------------------------------------------------------------
Other Comprehensive (loss) Income
Net (loss) gains on available for sale
financial assets (19,355) 39,317
(net of tax of $4,510, 2010 -
($6,488))
Exchange differences on translation of
foreign operations (10,704) (34,569)
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Other comprehensive (loss) income, net
of tax (30,059) 4,749
--------------------------------------------------------------------------
Attributable to:
Non-controlling interest 20,839 12,407
Equity shareholders of the Company 141,219 116,407
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Comprehensive Income, net of tax 162,058 128,814
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Profit attributable to equity holders
of the Company 170,364 111,658
Weighted average number of ordinary
shares outstanding 840,218,962 840,218,962
------------------------------
Basic and diluted earnings per share 0.20 0.13
------------------------------
High River Gold Mines Ltd.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Expressed in thousands of Canadian Dollars)
Year ended
December 31, December 31,
OPERATING ACTIVITIES 2011 2010
------------------------------
Profit after income taxes 191,203 124,065
Adjustments to profit for non-cash items
Depreciation of property, plant and
equipment 79,829 58,199
Accretion expense 1,391 1,364
Write-down of exploration 34 1,533
Loss/(gain) on disposal of investments 1,873 (10)
Non-cash mining costs (3,264) (25,081)
Fair value adjustment to financial
instruments - (13,685)
Gain/loss on disposal of property, plant and
equipment (231) 57
Deferred tax expense 44,640 (1,171)
Other non-cash items (7,813) 11,512
Working Capital Adjustments
Change in trade receivable and other assets (34,240) 5,296
Change in inventories (22,631) (14,535)
Change in other assets (32,137) (2,535)
Change in accounts payable and accrued
liabilities 8,625 13,409
Income Tax Paid (37,412) (4,073)
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NET OPERATING CASH FLOWS 189,867 154,344
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INVESTING ACTIVITIES
Investment in exploration and evaluation
assets (26,874) (17,109)
Expenditure on property, plant and equipment (74,421) (39,176)
Allocation of restricted cash
Proceeds on sale of property, plant and
equipment 1,547 1,641
Loans advanced (62,929) -
Other investing activities (21,182) (818)
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NET INVESTING CASH FLOWS (183,859) (55,462)
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FINANCING ACIVITIES
Proceeds from debt issuance 10,340 10,154
Payments of loans and borrowings (5,935) (60,822)
Proceeds from exercise of share options - 26,248
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NET FINANCING CASH FLOWS 4,405 (24,420)
----------------------------------------------------------------------------
Increase in cash and cash equivalents 10,413 74,462
Net foreign exchange difference (2,067) (2,559)
Cash and cash equivalents, beginning of the
period 153,964 82,061
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Cash and cash equivalents, end of the period 162,310 153,964
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